Mortgage lenders on both U.S. coasts fell prey to economic hardships and announced filing for bankruptcy.
Partner Mortgage Corp., a Mercer Island-based private mortgage fund, petitioned for Chapter 11-bankruptcy protection Friday in the U.S. Bankruptcy Court in Seattle, Wash., due to a rugged commercial real-estate market, the Seattle Times reported.
Meanwhile, Milestone Capital Inc., a self-described diversified financial services company, also filed a Chapter 11 petition, in the U.S. Bankruptcy Court in Newark, N.J., according to an announcement released Monday. The company said it sought bankruptcy protection for itself and that of its subsidiary, Elite Agents Mortgage Services Inc., after suffering capital losses over two years of unfinished merger negotiations.
Gary Craig, president and founder of Partner Mortgage, did not return requests for an interview from MortgageDaily.com but, according to the Times, specified the company has 300 partners who each invested $100,000. Two years ago, the company started lending money to commercial property owners as opposed to its usual market, single-family property owners who put up their property as collateral, the story said. The commercial mortgage losses caused trouble.
Assets of $80 million, 40 repossessed properties, and two unsecured creditors were reported for the Mercer Island lender, according to the Times. Partner cited estimates of $50 million to $100 million for both debts and assets, the court clerk told MortgageDaily.com, while the number of creditors ranged from 200 to 999.
"It's premature to tell how the bankruptcy will proceed," Partner Mortgage attorney Shelly Crocker told MortgageDaily.com in a phone interview. "The company's goal is to provide the highest return to its note holders."
Investors will reportedly get 80 cents back for every dollar invested, the Times said.
"The outlook for a recovery in the commercial real estate market is not promising," Craig reportedly said in a story published by the Puget Sound Business Journal. The company sought investors' approval to "wind down" the commercial portfolio of loans in a timely manner, the story said.
On the other hand, Milestone is continuing their business plan to merge, said company attorney William Katchen in a phone interview.
While Milestone "was unable to replace the capital it lost in its operation…the company hopes that transaction will be done," added Katchen. He said it has other business plans in the works, including a pending patent for software. By choosing Chapter 11, Katchen said it seeks external capital for another transaction to facilitate its restructuring out of bankruptcy.
Katchen said the New Jersey-based company's senior management worked over two years without any type of compensation to achieve the merger transaction.
"The same management still believes in the company, in its future and is still working after Chapter 11 without compensation," Katchen said. "It is the company's hope" to emerge from bankruptcy.